Several reports show banks are doing less loans outside of the federal relief program.
Community banks based on the Gulf Coast, from Polk to Collier County, handled more than 24,000 federal Payment Protection Program loans from early spring through the summer, totaling well over $1 billion. Companies receiving those loans — the PPP program ended Aug. 8, pending a possible government renewal of it — used the funds to save hundreds of thousands of jobs.
The clear PPP leader in the region is St. Petersburg-based First Home Bank, which handled more than 9,500 PPP loans, making the bank a statewide leader, too. Five other banks with a headquarters in the region handled at least 1,200 PPP loans. Executives at several banks that did PPP loans say in addition to coming through for current clients, the PPP work has created a pipeline of potential new clients dissatisfied with their current bank.
“We are proud to have originated more than $800 million (in) PPP loans, providing needed capital to businesses in Tampa Bay and around the nation at this critical time,” First Home CEO Tony Leo says in a statement. “The PPP program has introduced our institution to thousands of businesses and business owners throughout Tampa Bay, many of which are transitioning to full banking relationships.”
While these loans are life-saving for the business recipients — and participating banks are enjoying a solid bump in assets and will enjoy future government-paid fees off the loans — it has presented another challenge: non PPP loans are in decline. Some 70% of banks, for example, tightened loan standards for small businesses in the summer, according to the July Federal Reserve Senior Loan Officer Opinion Survey. Demand for non-PPP small business loans, the survey adds, was down nearly 30%.
In a separate survey, financial analysis firm Biz2Credit reports that lenders of all stripes, big and small banks, plus credit unions and alternative lenders, have mostly shied away from non-PPP loans. “It has been tough to secure more traditional small business loans in the coronavirus era,” says Biz2Credit CEO Rohit Arora in a statement. “The big banks hit a record low approval percentage of 8.9% in April but had been rebounding. In August, the upward trend reversed.”
Analysts at Raymond James, according to a post in American Banker, also weighed in on the pending decline in non-PPP loans in an early August note. “Standards have tightened and demand has declined to levels not seen since the great recession,” the St. Petersburg-based bank analysts wrote in the note “We expect conditions to remain tight with limited demand for new loans … until a resolution of the pandemic becomes apparent.”